CTA Case No. 4852 (Decision)

Republic of the Philippines COURT OF TAX APPEALS Quezon City I ITOGON-SUYOC MINES, INC., Petit i onet"', - versus C.T.A. CASE NO. 4852 COMMISSIONER OF INTERNAL p~ULs;~~rlj ~- REVENUE, Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - -x DEC:l:SION To this Court comes petitioner Itogon-Suyoc Mines, Inc. with the prayer that respondent Commissioner of Internal Revenue be ordered to refund or issue a tax credit certificate to herein petitioner for the sum of P7, 748,075.01, rept"'esenting input value-added tax <VAT> allegedly paid dut"'ing the pet"'iod Novembet"' 1, 1'390 to July 31, 19'31 and August 1, 1'3'31 to Januat"'Y 31, 1992 as shown in its application fot"' tax ct"'edit/refund filed on October 15, 1'391 and April 2'3, 1'392 respectively. Petitioner is a corporation duly organized and existing under the laws of the Philippines. It is engaged in the business of mining which includes the expl Ot"'at ion, development, operation and production of mining properties as 923

DECISION - C.T.A. Case No.4852 - 2- well as the eventual marketing of mine products produced by it. Pursuant to Section 107 of the National Internal Revenue Code as amended by Executive Order No. 273, petitioner registered itself with the Bureau of Intet~nal Revenue <BIR> East District, Makat i as a Value Added Tax <VAT> taxpayer with No. 32-0-000125 effective January 1, 1'388, later peti~ioner changed its VAT Registr"ation No. to 32A-8-008'355 with BIR West Distt~ict, Makati effective January 1,, 1'3'31, when petitioner moved to its new office at Pasay Road, Makati. Accordingly, petitioner" applied for zero-rating on its sales of mine products pl..\rsuant to Section 100 <Annex "B">. Petitioner filed with the VAT Division <BIR> Value-Added Tax Returns on the following dates to wit: L> Febt~uat"Y 20, 1'3'31 VAT t"etm"n fot" the quarter of November 30, 1'3'30 to January 31, 1'3'31 <Exh. "E" > ; C:. > May 20, 1'391 VAT t"etut~n for the quar�ter of February 1 to April 30, 1'3'31 <Exh. "F 11 ); 3. > August 20, 19'31 VAT t~et L\t~n for the quarter of May 1 to July 31, 1'391 <Exh. 8 11 11 ); 4. > November~ 20, 1991 VAT retur"n for the quarter of August 1, 1'388 to October 3, 1'391 <Exh. "H" > ; 5. > Fe'br~uar--y 20, 1'3'32 VAT r"etur~n for the quarter of November 19'31 to January 31, 1'3'32 <Exh. II I II) ; 924

DECISION - C.T.A. Case No.4852 - 3- Under Section 106 of the National Internal Revenue Code, petitioner filed with respondents VAT Division two (2) applications for credit/refund which is as follows: Date Filed Period Covered A�ount Applied For Oct. 15, 1991 Nov. 1, 1990 to 1='5,737,406.98 July 31, 1'390 April 29, 1992 Aug. 1, 1991� to P2, 01(), G68. 03 Jan. 31, 1992 No act ion had as yet been taken by respondent on the aforementioned application at the time the instant petition for review was filed on September 25, 1991, the avowed purpose of which is to beat the two-year reglementary period within which a judicial claim should be filed. Respondent on the other hand raised as special and affirmative defenses to wit: 1. > Petitionet"" has failed to clearly establish that its sales of mine product& are subject to zero-rate (0~) in accordance with Section 100 of the Tax Code; 2. > Petitionet""' s claim for tax credit/refund has ~till to be sub~tantiated by it; 3. > The amounts of P5, 737, 406. 98 and P2, 010, 668. 03, rept""esent i ng the alleged net input tax payments by petitioner for the pet""i ods from November 1, 1990 to July 31, 1991 and August 1, 1991 to Jam.1ary 1'392, respectively, were collected in � c c o r d\ \:a n c e with l.�w a..n. ~. ex~sting regulations. ~ �, 4.) � Well-settled is th~~~octrine that claims for ta,. refund/ct""edit pat""takl.h 'of the na.tut""e of an exempt i p~ which is con stt""Lleci ~trict 1y against the claimant !D. 925 j

r DECISION - C.T.A. Case No.4852 -,4 - 5.) Government officials cannot be held liable for moral or exemplary damages or for costs of suit, including attor"ney' s fees, when sued in the performance of their official functions. The issues to be resolved in this case are: 1.) Whether or not the sale of gold to the Central Bank is within the purview of constructive expor--t as provided in CB Circular No. 1301, 9 of 19917 2. > Whether" or not the petitioner" is ent it 1ed to tax credit/refund? We find it imperative to discuss first the two general classes of zero-rated transactions under the VAT law as this will aid us in the proper" r--esolution of the issues on hand. Under the first class is export sales defined under Section 100<a>, while the second class comprised of sales which are "effectively zero-r--ated". The first category is further subdivided into <a> transactions involving the actual sale " and shipment or exportation of goods to for"e i gn countries <regardless of the mode of shipment or manner of payment adopted> and (b) foreign currency denominated $ales. Now, petitioner claims that its sales of gold to the Central Bank are considered constructive exports. We cannot subscribe to such assertion, insofar as Section 100 <a> <1> is concerned, the general rule is that on 1y those transaet ions which at actual export i o_Y, of goods from the .. ' . .~�: �. r.:.. Philippines t~ another country and, �,h, ose which fall under the ~ �:. category of foreign currency denominated sales will be considered as sales and 926

DECISION - C.T.A. Case No.4852 - 5- Therefore, any other kind of "export sale", including those considered as "constructive expot~ts" under certain special laws are not considered as zero-rated sales since these neither involve actual expor~tation or shipment of goods nor can they be considered foreign currency denominated sales. At this junctl\re, it may be stressed that the controversy, i.e., whether or not petitioner's sales of gold to the Central Bank are export sales and therefore zero-rated VAT transactions, is not new. Said question has already been passed upon and extensively discussed by this Cout~t undet~ practically the same backdrop of the case at bar, when We ruled that sales of gold to the Centt~al Bank do not fall under the categor~ies of sales which can be classified as zero-rated in accot~dance with Sect ion 100 of the Tax Code. <Pls. see. Atlas Consolidated Mining Develop�ent Corporation vs. Co��issioner of Internal Revenue, CTA Case No. 4794 [Resolution dated May 5, 1'3'34J; see also Itogon-Suyoc Mines, Inc. vs. Co��issioner of Internal Revenue, CTA Case No. 4558, Febt~uary 20, 1'3'35 and Manila Mining Corporation vs. of Internal Revenue, CTA Case No. 48GO, Moreover, as aptly put in the case of Hongkong and Shanghai Bank vs. Petet~s, 16 Phi 1. 824 which is quoted hereto: 927

DECISION - C.T.A. Case No.4852 - 6- "1. In general, for purposes of the term �export sales', only direct export sales and foreign cut~t~ency denominated sales, shall be qualified for zero-rating." The law stt~ictly limits "export sales" .2..J:lll to direct export sales and fot~eign currency denominated sales, to be qualified for zero rating. It is a settled rule of statutory construction that the " express mention of one pet~son, thing or consequence implies the exclusion of all othet~s. Expressio unius est exclusio alt eri us. Thus, whe'l"'e a statute, by its terms, is expressly limited to certain matters, it may not by interpretation or construction, be extended to other matters. Furthet~more, petitioner asset~t s that CB Ci t~culat~ Nos. '36() and 1301 are legal and binding. These lawf. havfit the force of law and could serve as basis for the treatment of sales of gold to CB.as zero-rated pursuant to Section 100 of the NIRC. However a c~reful review of said provisions shows that they fail to meet the qualifications prescribed by Section 100 (a) (2) of the Tax Code. With respect to Section 16'3 of CB Circ1..1lar '350, all that said provision states is .. that "gold producet~s shall qualify as export oriented firms even if their entire output is sold to the Central Bank." It doe* not, however, grant such pro~ucers any exemption in respect u ;- in t e n1 a 1 rev en u c tax e ~ due . on it: ';; sa 1 e s t o the Central ~jank. 928

DECISION - C.T.A. Case No.4852 - 7- provision which effectively subject sales of gold to the CB to a zero-VAT rate. Petitioner likewise maintain that VAT Ruling No. 8-92 is not valid being in violation of law. And even assuming VAT Ruling No. 8-92 to be valid, it cannot be applied retroactively as such would be prejudicial to the petitioner, citing Section 246 of the NIRC as basis. Moreover, it insist that the case of ABS-CBN Broadcasting Corporation vs. Court of Tax Appeals, 108 SCRA 142, is squarely in point. Section 246 of the Tax Code provides as followsl SEC. 246 Non-t"ett~oactivity or r~ulings. - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejt..ldicial to the taxpayers except in the following case: (~) where the taxpayer deliberately misstat~s or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts st..tbsequent 1y gather"ed by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or <c> where the taxpayer acted in bad faith." It is clear from the foregoing provision that the in fa.c�..t. revocations, modifications ,. t- : ~ .~ .. . :� ' :-'�-- . �' � .� � . � . �. ' . flnd( pr. rtV,ersa.l !i,� of prev ill US fH ~ t~-~le.IS, reg~,-tlat ions, rulings :�)�:��;.H� -;<'�''i�,~:('��:� '��;, �... ?~:~::~,_-~�>>'~� '�<>-~�� :"r\ _,~.;~~ i. 'p,f: ~~Sf s ~on a ; ~~X -~e glv~r- re~ r,~~-R~-~-:-'e ap p.l'f",<i' t:~t i on. is '' . :�~~~t~�:; ' . �, :.~-~- -'"~-. ":~ .� . '......~~- :.: ;_>:< .P"!}Y . whe!l �~;~ reh"oact i ve appl iR.~;~i~~~? wi 11 result in 1 prejt..tdice to the taxpayer that the tamt-- l !~I"-~-� � e"'"_' ~' _hibited. ~ ~ ' '-~~-- /:~.: .'f 929

DECISION - C.T.A. Case No.4852 - 8- Now, petitioner poses the question of whether or not it will be prejudiced by such retroactive revocation. It further argued that it would stand to lose its opportunity of seeking a refund of its uncredited input taxes. This arguments are purely speculative and therefore untenable. In fact, petitioner has not been assessed by t"'espondent Commissioner any deficiency tax as a result of the retroactive application of VAT Ruling No. 008-92. For the prohibition in Section 246 of the Tax Code to apply, it must be shown that the taxpayer will suffer actual and imminent, opposed to contin~ent and speculative, prejudice as a result of the retroactive application. Respondent Commissioner is correct in holding that petitioner will not suffer any undue prejudice from a �" retroactive application of VAT Rulings No. 008-92 and 59-92 as cited by respondent in his Ruling No. 59-92.~ "When the same mining companies, relying upon the afot"'ementioned earlier BIR rulings, they did not fully pass-on to the CB the cost of their respective input taxes. Said input taxes remained in their possessions <sic). The only repercussion of the revocation of the said earlier rulings is - they will be prevented the option of claiming the said input taxes as refund. But, they remain entitled to use the same in paying their outpltt taxes in connection with their othet"' sales transactions which are subject to the 10';( VAT. It follows, there is no prejudice that may ensue from the retroactive application of the s~id revocation because what they only lose is the 'right to have their input taxes refunded which, in the first place and under the law, they are any way, clearly not entitled to. Granting for the sake of 930

DECISION - C.T.A. Case No.4852 9- argument, that they have no other sales transactions subject to 10~ VAT against which their input taxes may be used in payment, then it follows, they are constituted as the final persons against which the costs of the tax passed-on shall legally stop and rest, hence, in this connection, the said input taxes may already be legally converted as cost available as deduction for income tax purposes. On this score, they are also not prejudiced by the retroactive application of the said ruling." As to petitioners reliance in the ABS-CBN case ruling, the Co1..trt maintains that there is nothing in said decision which absolutely prohibits a retr~oactive application of the rules, regulations, rulings or decisions promulgated or rendered by respondent Commissioner pursl..tant to his rule- making authority. Additionally, the factual antecedents in the ABS-CBN case is not in all four~s with the case at bar, Sl..tch t~eliance is clearly misplaced. In conclusion we find that petitioner has not established that i-t' will be prejudiced by the retroactive application of VAT Rulings No. 008-92 and 59-92. Going over petitioners argument that VAT Ruling No. 008- 9 -::o� insofar as it establishes an exception to the general "'"' rule laid down in Section lOO<a> <1> of the Tax Code] is devoid of merit, anc;l therefot"e untenable. This rl..tling was issued in accordance with Section 245 of the Tax Code, which empowers the Secretary of Finance to ''promulgate all needful rules and regulations for the effective enfor~cement of the pr visions of tht:: ax Code." 931

DECISION - C.T.A. Case No.4852 - 10 - WHEREFORE, in view of the fot""egoing, the petition is hereby DENIED for lack of met""it. No pronouncement as to costs. SO ORDERED. GRUBA Judge WE CONCUR: <Diss nting Opinion) ERN STO D. ACOSTA :di~:z VE~ ~ RAMON Asso 0. eDEJud�~v ciat CERT:J:F:J:CAT:J:ON I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accot""dance with Section 13 At""ticle VIII of the Constitution. e-~o~~ ERNESTO D.ACOSTA Presiding Judge Court of Tax Appeals 932